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Apple's App Store hiked its prices. Here's why

If you're browsing Apple's App Store today, you'll notice everything seems slightly more expensive. Notably, the familiar 69p price point is notoriously absent, the cheapest paid apps now a uniform 79p. If the change seems sudden, you're not alone -- even app creators only learned of the price spike less than two days before they went into effect.

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It's not the Cupertino giant price gouging developers or customers though, but rather the result of a complicated new tax arrangement affecting sales of digital products across Europe. In a last-minute email, vendors were told "prices on the App Store will increase for all territories in the European Union as well as in Canada and Norway, decrease in Iceland, and change in Russia. These changes are being made to account for adjustments in value-added tax (VAT) rates and foreign exchange rates."

The new rules, which WIRED.co.uk reported on last March and came into effect on 1 Jan, mean businesses of any size have had to change how they report and file taxes for international sales, paying according to the location of the customer rather than the seller and having to file for each country sold to. Previously, massive retailers such as Amazon could set up shop -- in legal terms -- in Luxembourg, enjoy the lowest VAT rates in Europe, and sell internationally without incurring the higher taxes paid here in the UK, for instance.

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The new regulations were intended to stop that practise, but have been implemented without exceptions in place for small businesses. For instance, here in the UK companies don't have to pay VAT until they earn over £81k. With nothing similar in effect across the continent, the only corporate entities capable of navigating the labyrinthine tax laws of dozens of countries are the very same giants the rules were meant to combat. The only escape for microbusinesses is to sell through larger third parties, which sort out the tax drama on a massive scale.

Hence the Apple price hike -- it accounts for the higher regional taxes and increased accounting costs to sort out the multiple taxation streams, without further cutting into developers' profits from selling through the platform. However, although it's more convenient, it highlights the worst knock-on effect of the EU's new rules: smaller companies are left with little choice other than to sell through bigger ones, reducing their autonomy and overall income.

tells WIRED.co.uk. "To be honest, I think Apple's hands are tied," Morris continues. "As a portal, they need to accommodate the new VAT changes on behalf of the developers otherwise they run the risk of developers being put off with the prospect of having to file returns for each individual country."

The tax changes have been so rapidly implemented that there's little public awareness of the reasoning though. To the average user though, they only see a higher price on their apps. "There might be some short-term confusion from consumers when they see 79p as a start price instead of the usual 69p, and of course we hope that this is not seen as developers hiking prices!" says Lee Adams, Managing Director at Full Fat. "It's very similar to when prices increased from 59p to 69p, and back then the change was generally well received by the public, so we hope the same will happen this time around too."

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For the near term, both developers are remaining optimistic, with Morris expecting "hardly any difference in terms of revenue," but that "the vocal minority who complained about previous price points will complain about the newer ones -- they also would be the ones who complain 69p is too expensive for a game." Adams adds that "at the moment, we're not anticipating any major changes" but adds "this might mean tailoring prices on a regional basis in the future, which hasn't been necessary in the past."

However, the longer term impact of the tax rules, both on a pan-European basis and for developers and customers affected by the higher App Store prices, remains to be seen.